PetSmart confirms exploring options amid pressure

Tuesday, 19 Aug 2014 | 6:21 PM ETReuters

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PetSmartconfirmed Tuesday that it plans to explore a potential sale of the company. Several shareholders, led by activist investor Jana Partners, have been pressuring the pet supply retailer to sell itself.

"Notwithstanding our confidence in the company's future prospects...we have decided to explore options to maximize shareholder value, including a potential sale of the company," said PetSmart Chairman Gregory Josefowicz, in a statement.

The company also said second-quarter earnings rose 10 percent from a year ago,to 98 cents per share, beating Wall Street expectations by 5 cents, while net income increased 5 percent from a year ago to $98 million.

PetSmart has a market capitalization of nearly $7 billion.

There is no guarantee the review will lead to a deal and PetSmart could still determine that it would be better off on its own, Reuters reported earlier, citing sources with knowledge of the matter.

PetSmart's likely move marks yet another victory for Jana. The firm, which is run by Barry Rosenstein, has amassed stakes in companies it perceived to be undervalued and successfully pushed them to sell themselves in recent months.

Last year, Jana pushed Safeway to review strategic alternatives after disclosing a stake in the grocery chain in September. Safeway agreed in March to be acquired by private equity firm Cerberus Capital Management in a deal valued at about $9.4 billion.

PetSmart has faced mounting investor pressure at a time when fierce competition from large retailers including Wal-Mart and Amazon is squeezing specialty stores.

Jana Partners, which has reported a 9.8 percent stake in PetSmart, has been calling on the company to pursue a sale after what it calls years of financial underperformance. It has been joined in its push by other investors, including Longview Asset Management.

Phoenix-based PetSmart, founded in 1986, has about 53,000 employees and operates more than 1,340 pet stores, according to its website.